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Have you ever considered setting up a profit-sharing program for your team?
We think it’s safe to say that this is something most small business owners and leaders would love to do for employees as a reward for their hard work. However, they aren’t sure where to start.
That’s about to change because, on this episode of Priority Pursuit, we are joined by Laura Ciriello-Benedict of Ciriello Plumbing as she explains exactly how to set up a profit-sharing program in your small business.
As Ciriello Plumbing’s president, one of Laura’s top priorities is caring for her team. And, she is able to make this a priority through systems, including a profit-sharing system she designed.
While Laura is full of business wisdom and there’s so much that she could share on the show, in this episode, she’s joining us to share exactly how to set up a profit-sharing program in your small business so that you too can motivate and serve your team well.
What is a Profit-Sharing Program
Profit-sharing programs give employees another way to control what they make beyond their hourly wage. And, because of the type of work they do, Ciriello Plumbing wanted to use this kind of program to incentivize their employees to work as quickly and efficiently as possible.
Everyone is motivated to do better if they know there is more in it for them, which is exactly what the profit-sharing program is designed to provide. After taking a deep look at their systems and costs, Ciriello Plumbing was able to decide what level of profit was necessary to keep the shop running. With this knowledge, they created a program in which any extra profit earned goes directly to the technicians who performed the service.
As long as the predetermined profit threshold is met, any profit made above that level is shared with the technicians in proportion to the work they did on the job or project. For example, if they are the sole technician on a job, they would receive the additional profit. If they worked with someone else and only did 30% of the work—based on hourly rates—they will receive 30% of the additional profit.
Again, profit-sharing is a way employees can control the money they make, which is why Ciriello Plumbing labels it as a “self-directed raise.” On average, technicians can earn 3-5 dollars extra per hour because they’ve embraced the system, learned to gain efficiencies in their jobs, and have become better estimators—all of which have made a big, positive difference for the company.
Why Small Businesses Should Consider Setting Up a Profit-Sharing Program
There’s no doubt we are in a competitive labor market. Because of this, you as a small business need to stay in a position where you’re open to change and possibilities. The old ways of doing things are usually old for a reason. According to Laura, you can either stay there and stay old, or you can move forward and really make changes and grow in ways you couldn’t fathom before.
For Ciriello, the profit-sharing program has been an extraordinarily effective method of staying competitive in the current market, in terms of finding both projects and potential new talent.
Increased Profitability
Before this program was put in place, they only had one chief estimator who was bogged down from constantly doing both big and small estimates. However, with the new program incentivizing and giving technicians the confidence to quote smaller jobs themselves, the chief estimator has been freed up to focus on those bigger projects.
Plus, with more people giving estimates, they’ve been able to work on more projects than the chief estimator ever would’ve been able to quote on their own.
And, the overall return on investment has been three-fold. The increase in projects and resulting profits have had a major impact on the top and bottom lines and sales in general. In fact, over just a few months and with 12 technicians, Ciriello Plumbing saw an added $480,000 in work.
And this came from feeding and investing in the staff they already have rather than onboarding more people. Laura shares that while many business leaders feel that they need to grow their team in order to reach new levels as a business, this isn’t always the case. If you can get more efficiency and buy-in from your current team, you should always start there.
How to Set Up a Profit-Sharing Program in Your Small Business
Creating a profit-sharing program in your small business can be a game changer, but it doesn’t happen overnight. You have to build it.
Systems
Laura shares that this program couldn’t have happened five years ago. They simply did not have the capacity or systems in place at the time to make it the effective tool it is now. With this in mind, the first step to creating a profit-sharing program is to evaluate where your business is at.
According to Laura, Ciriello Plumbing is a very data-driven company. And, because of this, they’re able to see which aspects of their business are performing well and which need to be updated based on their numbers. Even if you think a part of your small business is running at its full potential you may find that you’re missing a crucial piece of the puzzle when you sit down and take a look at what the numbers are telling you.
This is why it is crucial to take the time to evaluate your business. You need to understand everything that goes into your business and the true end costs of your services. Once you understand this, you can begin to build up your profit-sharing systems.
Software and Outside Help
When it comes to the logistics of a program like this, Laura places a lot of credit on software. While QuickBooks is great for most business practices, it isn’t quite enough to cover all the ins and outs of a profit-sharing program. For their needs, Ciriello Plumbing also uses dispatching software that works with QuickBooks for accounting.
As with anything in life, if you use something to its maximum, you will get the maximum out of it. With that in mind, consider the applications of your current software and how you can build on that or what you can add to it to get the most out of it.
Software isn’t the only tool you may need in this process—you might need to outsource some things as well.
As most business leaders know, payroll can be a bit of a headache, especially when you add a whole new element to it. However, outsourcing your payroll with a trustworthy company like Gusto could save you time and hassle and allow you to implement programs like profit-sharing for your company.
According to Laura, the profit-sharing program doesn’t need to be complicated in terms of payroll. At Ciriello Plumbing, this self-directed raise simply gets added to the technician’s paycheck as a bonus, so you don’t need to recalculate the hourly rate or change the technical elements of how your staff gets paid.
Presentation
The way you present this program and how it influences your employees’ pay can have a major impact on employee retention and attraction and whether or not people buy into the program at all.
Everything you do as a business owner is about packaging and presentation. Even if you have the best benefits package in the world, people won’t see the value in it if it’s not presented in the right way.
One of the big things that companies who pay their employees hourly miss out on is not taking credit for the benefits they provide and not successfully presenting them in a way that employees readily understand and see the value in.
That’s why Laura takes the time each quarter to break down the monetary value of the benefits Ciriello Plumbing provides—including the profit-sharing program. In doing this, she ensures that her technicians see the true worth behind their wage package and how it goes far beyond what their hourly compensation may be.
Be sure to listen to this whole episode (at the top of the page or wherever you listen to podcasts) to hear more about Laura’s experience with how to set up a profit-sharing program in your small business. If you’d like to connect with Ciriello Plumbing, you can visit their website at https://cirielloplumbing.com/ or call (317) 787-5391.
Links & Resources Mentioned in This Episode
- Learn More About Ciriello Plumbing
- Learn More About Payroll Service Gusto
- Receive 50% Off Your First Year of HoneyBook
- Learn More About Treefrog’s Small Business Marketing Resources & Services
- Join the Priority Pursuit Facebook Community
- Follow or DM Treefrog Marketing on Instagram
- Follow or DM Kelly Rice on Instagram
- Follow or DM Victoria Rayburn on Instagram
The Priority Pursuit Podcast is a podcast dedicated to helping small business owners define, maintain, and pursue both their personal and business priorities so they can build lives and businesses they love.
You can find The Priority Pursuit Podcast on Spotify, Apple Podcasts, Amazon Podcasts, Stitcher, and wherever you listen to podcasts.
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